Brazilian claimants alleging environmental harm against salt mine operator in the Netherlands
On 21 September 2022, the District Court of Rotterdam handed down an interim judgment which will be of interest to all parties and practitioners involved in multi-jurisdictional cases, and in particular cases concerning alleged environmental and human rights violations. [1]
Factual background
The case involves a group of claimants from communities surrounding a salt mine operated by global multinational, Braskem, in Maceió, Brazil. It is alleged that the destabilisation of underground cavities from mining has led to land collapses. Some 8,000 families have been evacuated from four high-risk districts where buildings have cracked, roads have collapsed, and large craters have been exposed. [2]
The defendants
The first defendant to the claim is Braskem’s parent company, Braskem SA, which is based in Brazil. In addition, three Dutch (NL) subsidiaries are listed as co-defendants.
The three NL subsidiaries were not directly involved in operating the salt mine. The court described Braskem Netherlands B.V. as a holding company for the operating companies of the Braskem group outside South America. It also undertakes some operational activities such as providing raw materials to the Braskem group for production of petrochemical products, or selling products produced on the American continent into European and Asian markets. The two remaining NL subsidiary defendants (Braskem Netherlands Finance B.V. and Braskem Netherlands Inc. B.V.) are characterised as financing companies whose purpose is to enter into financial transactions; attracting debt capital from investors and making loans within the Braskem group.
Applicable substantive law
The claimants argue that Brazilian law applies to the claim and that, crucially, this provides a concept of the ‘indirect polluter’ which means that each defendant may, in principle, be held jointly and severally liable for the harm caused by the salt mine. Although the defendants’ position is that this has no basis in Brazilian law, the Dutch court simply noted that the question of liability will be left to be determined in the main proceedings.
Jurisdiction
Under Article 2 of the Dutch Code of Civil Procedure [3], jurisdiction is assumed over the NL subsidiaries because they are established in the Netherlands.
Article 7(1) of the Dutch Code of Civil Procedure, in turn, provides that:
“If, in cases which must be brought by writ of summons, the Dutch court has jurisdiction over one of the defendants, it shall also have jurisdiction over other defendants involved in the same proceedings, provided that the claims against the various defendants are so interrelated that reasons of expediency justify joint proceedings.” [4]
Braskem argued that there should be no jurisdiction over the Brazilian parent company because there was no close factual or legal connection between the claims brought against the Brazilian and NL entities. Braskem took the position that the Dutch proceedings concerned an exclusively Brazilian issue, in which the Braskem NL entities were mere extras.
Decision
The court disagreed with Braskem, deciding that the claims were inextricably linked.
The court had, in any event, jurisdiction to assess the claims against the Braskem NL entities and, when doing so, it would be required to examine the factual and legal position in Brazil. This was because the claimants relied on the acts and/or omissions of the Brazilian entity giving rise to the harmful consequences for which it was alleged the Braskem NL entities are jointly liable. The fact that specific accusations were made against each of the defendants individually (in the sense that each entity’s role was distinct) did not alter the fact that the alleged infringement was the same and that, in order to assess the various allegations, a number of common questions of fact and points of law had to be answered.
Accordingly, the court determined that there was a sufficiently interrelated connection between the claims that joint proceedings were justified.
In reaching this decision, the Court made the forceful assessment that the Braskem group, and thus Braskem SA as the group's top holding company, had chosen to locate the entities that make financial decisions (and its European headquarters) in Rotterdam. Having done so, Braskem could reasonably foresee that the Dutch Court could hear proceedings not only against its NL subsidiaries but also against the top holding companies if claims were brought against them.
The UK perspective
In recent years, there has been much progress in the English courts in securing jurisdiction over alleged corporate wrong-doers by utilising the doctrine of parent company liability. In such cases, claims are often pursued against i) a parent company that is domiciled within the jurisdiction (generally, where the ‘Head Office’ is registered and based in London) and ii) subsidiaries that are local to the harm caused, but outside the jurisdiction.
In those circumstances, jurisdiction is prima facie available over the parent company because they are domiciled within the jurisdiction. However, permission is required to serve out of the jurisdiction on the local subsidiaries. This has generally been secured under paragraph 3.1(3) of Practice Direction 6B of the Civil Procedure Rules [5], which provides that, where a claim is made against a defendant who may be served without permission (i.e. the ‘anchor defendant’) permission may be granted to serve on another entity outside the jurisdiction where:
- There is a “real issue” between the claimant and the anchor defendant which is reasonable for the court to try; and
- The additional person (outside the jurisdiction) is a “necessary and proper party” to the claim.
High-profile examples of this strategy being successfully employed by claimants include Lungowe v. Vedanta Resources [6], Okpabi v. Royal Dutch Shell [7] and Município de Mariana v. BHP[8].
A key challenge in pursuing this strategy is establishing that there is indeed a ‘real issue’ to try between the claimant and the parent company anchor defendant. The claimants are tasked with establishing sufficient nexus (which might include direction, control or – conversely – failure to enforce group policies) between a multinational parent company and the conduct of its subsidiary to establish parent company liability under UK tort law. The claimant’s task is made no easier by the fact it must do so at a preliminary issue stage before disclosure has occurred.
The claimants in Braskem have, however, pursued the reverse strategy. Here, the anchor defendants are the NL subsidiaries with the extra-jurisdictional defendant being the parent company.
Comment
On one hand, this interim judgment applies Dutch procedural law in a manner that is consistent with the doctrines set out in previous Dutch case law. Having satisfied the court that the ‘indirect polluter’ principle arguably gave rise to liability on the part of the subsidiary anchor defendants, it was predictable that jurisdiction would be assumed over the interrelated claims against the Brazilian parent company.
However, the trend has often been to pursue cases of this type in the home jurisdiction of the parent company (as per the UK examples given above). This can carry key benefits including heightened public scrutiny, a defendant against whom judgment can readily be enforced and avoiding difficulties regarding access to justice in local jurisdictions where corruption or intimidation may be real concerns.
The Braskem case, however, demonstrates that it would be a mistake to only focus on issues where the parent company is domiciled within the chosen jurisdiction. Here, careful consideration of the applicable Brazilian law in combination with the Dutch rules of procedure has resulted in jurisdiction being established in the chosen forum notwithstanding that the anchor defendants were subsidiaries with no operational involvement in the salt mine. It has also shown, once again, that the Netherlands jurisdiction is a particularly attractive to claimants seeking to uphold their environmental and human rights. [9]
In the UK, revised jurisdictional gateways came into force on 1 October 2022 and litigators will particularly wish to examine the new rules for potential opportunities to establish jurisdiction in a favourable forum.
Footnotes
[1] Rotterdam District court, 21-09-2022, ECLI:NL:RBROT:2022:7549 https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBROT:2022:7549 (Dutch only)
[2] https://revista.drclas.harvard.edu/the-rock-salt-of-the-earth/
[3] Wetboek van Burgerlijke Rechstvordering.
[4] This is based on the precursor of Article 8 of Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (‘Brussels I’)
[5] https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part06/pd_part06b
[6] [2019] UKSC 20
[7] [2021] UKSC 3
[8] [2022] EWCA Civ 951
[9] See for example: Urgenda Foundation v. State of the Netherlands; Milieudefensie et al. v. Royal Dutch Shell plc.